Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Definitions and related matters - Residence and source in New Zealand

YD 4: Classes of income treated as having New Zealand source

You could also call this:

“Types of income considered to be from New Zealand for tax purposes”

You should know about different types of income that are treated as coming from New Zealand. This is important for tax purposes.

If you run a business, the income is from New Zealand if your business is fully or partly in New Zealand. For work contracts, it depends on where the contract was made and where the work is done.

Money you earn from a job in New Zealand is considered New Zealand income, even if your boss isn’t from here. Accident compensation payments and some pensions are also counted as New Zealand income.

If you own land in New Zealand, the money you make from it is New Zealand income. The same goes for using personal property in New Zealand, but there are some rules about who pays you.

Money from New Zealand companies, like dividends, is treated as New Zealand income. Interest from money lent in New Zealand or to New Zealanders is usually considered New Zealand income too.

If you sell property in New Zealand, that money is from here. Money from trusts can be New Zealand income if the trust’s money comes from here.

There are special rules for income from air and sea transport, insurance premiums, and some types of international business.

Lastly, any other income that comes directly or indirectly from New Zealand is treated as New Zealand income.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1523142.

Topics:
Money and consumer rights > Taxes
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Part Y Definitions and related matters
Residence and source in New Zealand

YD 4Classes of income treated as having New Zealand source

  1. This section lists the types of income that are treated as having a source in New Zealand for the purposes of this Act.

  2. Income derived from a business has a source in New Zealand if—

  3. the business is wholly carried on in New Zealand:
    1. the business is partly carried on in New Zealand, to the extent to which the income is apportioned to a New Zealand source under section YD 5.

      1. Income derived by a person from a contract has a source in New Zealand if the contract is—

      2. made in New Zealand, except to the extent to which the person wholly or partly performs the contract outside New Zealand, and the income is apportioned to a source outside New Zealand under section YD 5:
        1. made outside New Zealand but the person wholly or partly performs the contract here, to the extent to which the income is apportioned to a New Zealand source under section YD 5.

          1. An amount that is income under section CE 1 (Amounts derived in connection with employment) has a source in New Zealand if the amount is earned in New Zealand, even if the employer is not a New Zealand resident.

          2. An accident compensation payment as defined in section CF 1(2) (Benefits, pensions, compensation, and government grants) has a source in New Zealand.

          3. The following amounts have a source in New Zealand:

          4. a pension or annuity payable by the government of New Zealand:
            1. a pension or annuity payable out of a superannuation scheme established in New Zealand:
              1. a gratuitous payment, within the definition of pension in section CF 1(2), if the services are provided in New Zealand.

                1. Income derived by a person as the owner of land in New Zealand has a source in New Zealand.

                2. Income, other than a royalty, derived as consideration for the use of, or right to use, personal property in New Zealand has a source in New Zealand if the income is—

                3. paid by a New Zealand resident:
                  1. paid by a non-resident, and for which the non-resident is allowed a deduction.

                    1. A royalty has a source in New Zealand if it is—

                    2. paid by a New Zealand resident and not made in connection with a business they carry on outside New Zealand through a fixed establishment outside New Zealand:
                      1. paid by a non-resident, and for which the non-resident is allowed a deduction.

                        1. Income derived from shares in, or membership of, a company resident in New Zealand has a source in New Zealand.

                        2. The following amounts have a source in New Zealand—

                        3. interest or a redemption payment derived from money lent in New Zealand:
                          1. interest or a redemption payment derived from money lent outside New Zealand—
                            1. to a New Zealand resident, except to the extent to which the money is used by them for the purposes of a business they carry on outside New Zealand through a fixed establishment outside New Zealand and the interest or redemption payment is not apportioned to a New Zealand source under section YD 5(4):
                              1. to a non-resident, if the money is used by them for the purposes of a business they carry on in New Zealand through a fixed establishment in New Zealand:
                              2. income from securities issued by the government of New Zealand:
                                1. income derived from debentures issued by a local authority or public authority:
                                  1. income derived from a mortgage of land in New Zealand.

                                    1. Income derived from the disposal of property situated in New Zealand has a source in New Zealand.

                                    2. Income derived by a beneficiary from a trust has a source in New Zealand to the extent to which the income of the trust fund has a source in New Zealand.

                                    3. Income derived from transporting people or property by air has a source in New Zealand if the transportation leaves from New Zealand.

                                    4. Income derived from transporting people or property by sea has a source in New Zealand if the transportation leaves from New Zealand to the extent to which the income is apportioned to a New Zealand source under section YD 6.

                                    5. A premium for general insurance paid to a non-resident general insurer of the type described in section YD 8 has a source in New Zealand to the extent set out in section YD 8(2).

                                    6. Income of a non-resident life insurer calculated under section EY 48 (Non-resident life insurers with life insurance policies in New Zealand) has a source in New Zealand.

                                    7. Income has a source in New Zealand if, treating all of the partners of a New Zealand partnership as resident in New Zealand, the income is treated as having a source in New Zealand under another provision of this section. The application of the other provisions of this section is unaffected if this subsection does not apply.

                                    8. Income attributable to a permanent establishment in New Zealand of a non-resident has a source in New Zealand, except if—

                                    9. subsections (15) to (17) provide otherwise:
                                      1. the income is a dividend from a share in a foreign company that is not revenue account property.

                                        1. Income of a non-resident that may be taxed in New Zealand under a double tax agreement and does not have a source under subsections (15) to (17) has a source in New Zealand unless the income is—

                                        2. a dividend from a share in a foreign company that is not revenue account property:
                                          1. fees for technical, management, or similar services that are treated as royalties under a double tax agreement:
                                            1. a royalty or interest payment attributable, under a double tax agreement, to a permanent establishment outside New Zealand.

                                              1. Income derived directly or indirectly from any other source in New Zealand has a source in New Zealand.

                                              Compare
                                                Notes
                                                • Section YD 4(11)(b)(i): replaced, on , by section 294 (and see section 5) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                                                • Section YD 4(17B) heading: inserted, on , by section 26(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).
                                                • Section YD 4(17B): inserted, on , by section 26(1) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).
                                                • Section YD 4(17C) heading: inserted, on , by section 50(1) (and see section 50(3) for application) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).
                                                • Section YD 4(17C): inserted, on , by section 50(1) (and see section 50(3) for application) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).
                                                • Section YD 4(17D) heading: inserted, on , by section 50(1) (and see section 50(3) for application) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).
                                                • Section YD 4(17D): replaced (with effect on 1 July 2018), on , by section 120 of the Taxation (Annual Rates for 2023–24, Multinational Tax, and Remedial Matters) Act 2024 (2024 No 11).
                                                • List of defined terms dividend: inserted, on , by section 50(2) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).
                                                • List of defined terms double tax agreement: inserted, on , by section 50(2) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).
                                                • List of defined terms foreign company: inserted, on , by section 50(2) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).
                                                • Section YD 4 list of defined terms New Zealand partnership: inserted, on , by section 26(2) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).
                                                • Section YD 4 list of defined terms partner: inserted, on , by section 26(2) of the Taxation (Limited Partnerships) Act 2008 (2008 No 2).
                                                • List of defined terms permanent establishment: inserted, on , by section 50(2) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).
                                                • List of defined terms revenue account property: inserted, on , by section 50(2) of the Taxation (Neutralising Base Erosion and Profit Shifting) Act 2018 (2018 No 16).
                                                • Section YD 4 compare note: amended, on (with effect on 1 April 2008), by section 248 of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).